A positive start to Australian trade is likely after a sniff of a US budget deal helped Wall Street dramatically pare a fourth night of losses.
The March SPI 200 futures contract ended the night session nine points or 0.2% ahead at 4637 as US stocks caught a late boost from reports that the House of Representatives will reconvene on Sunday. The news raised hopes that a last-minute deal to avert the introduction of a US$607 billion package of spending cuts and tax increases on January 1 is still possible.
Mid-session, the S&P 500 was on course for its heaviest fall in at least a month before cutting its loss to 0.13%. The Dow slashed a 151-point tumble to just 19 points or 0.14%, the same percentage decline as the Nasdaq.
"The markets remain held hostage to the perceived negotiations in Washington regarding the fiscal cliff," the chief equity strategist at US Bank Wealth Management told Bloomberg. "It's our take that there are talks going on and that they're substantive, but time is growing short."
US stocks deteriorated for much of the session after Democrat Senate Majority Leader Harry Reid warned a fiscal cliff deal before year-end was "unlikely". The turnaround came after Republican leaders told members of the House they should prepare to reconvene on Sunday night. Traders interpreted that as a signal that a compromise may be in the offing. CNBC video here.
The impact of the fiscal cliff debate resounded through the December consumer confidence report, released overnight. The Conference Board's consumer-confidence index slumped to 65.1 from a downwardly-revised 71.5 in November, well below economists' expectations for a reading around 70.
Other data were more positive. Sales of new homes hit a two-year+ high last month and first-time applications for jobless benefits dropped 12,000 to 350,000 last week.
Most major European markets advanced as they resumed trading after the Christmas break. Germany's DAX rallied 0.26%, France's CAC put on 0.59% and Britain's FTSE was unchanged.
Oil rebounded with US equities. West Texas crude for February delivery was recently up 18 cents or 0.2% at US$91.15 a barrel after earlier falling as low as US$90.05.
Gold reversed Wednesday's losses. Gold for February delivery was lately ahead $3.70 or 0.2% at US$1,664.40 an ounce.
Copper was supported by more positive Chinese economic data yesterday. Government data showed profits earned by Chinese industrial companies increased 22.8% last month from a year ago. US copper for March delivery was recently up one cent or 0.2% at US$3.60 a pound. In London, copper rallied 1.1%, lead 1.3%, tin 0.8% and zinc 1.4%. Aluminium eased 0.1% and nickel lost 0.4%.
TRADING THEMES TODAY
WASHINGTON PULLS BACK FROM THE BRINK?: A volatile night on Wall Street saw the major indexes on track for their worst session of the month before the possibility of a late budget deal fuelled a sharp turnaround. As several commentators pointed out, there's no guarantee that the reconvening of the House of Representatives will produce a deal, but it was enough to encourage some of the shorts to cover this morning. Our market has been more resistant to negativity on Wall Street lately, presumably because signs of improvement in China are bringing international capital into our market in search of exposure to that recovery. BHP and RIO were both positive in US action overnight and should provide some momentum here. Volumes will remain subdued for some days to come and opportunities scarce but there was enough happening yesterday to generate a decent wage.
ECONOMIC NEWS: No significant domestic data scheduled today. Japan has a slew of data on tap between 10.30am EST and 12.30pm. Tonight's US highlights include pending home sales, Chicago PMI, crude oil inventories and natural gas storage.
